How much net wealth do different households have in different countries?

Source: Eurosystem HFCS 2017.

We first take a look at the distribution of net wealth in each country.

The table shows the distribution of net wealth across households for every country. Households are arranged according to their absolute net wealth (in EUR thd) from low (P1) to high (P99).

Dispersion is high in every country: households with very low and very high net wealth can be observed.

In Austria, approximately 50% of all households have a net wealth below 83,000 euros. Only 5% of all households have a net wealth above 866,000 euros. Some countries (e.g. Italy) have higher medians but comparatively lower wealth values at the right tail of the distribution.

Note that the table allows to sort the countries according to their net wealth value for each percentile.

How does inequality of net wealth compare across countries?

Source: Eurosystem HFCS 2017.

The table shows different measures of wealth inequality across countries.

According to the Gini coefficient, where a higher value expresses higher inequality, Austria belongs to the countries with the highest wealth inequality (0.73) together with the Netherlands (0.78), Cyprus (0.75) and Germany (0.74). This ranking changes when other inequality measures are used.

In all countries, households in the lower half of the distribution hold only a tiny fraction of aggregate wealth. The 50% poorest households hold less than between 15% of total net wealth in Slovakia and 0.5% in the Netherlands, while the 5% richest households hold more than between 27% of total net wealth in Greece and 49% in Cyprus.

The high inequality of the wealth distribution in Austria and Germany and the very small fraction of aggregate wealth held by households in the lower part of the wealth distribution in these two countries, reflect the fact that the well-developed welfare state in both countries offers many state-organized insurances against the contingencies of life as substitutes for private wealth (for a more detailed discussion see Fessler and Schürz (2018)).

How do income inequality and wealth inequality relate?

Source: Eurosystem HFCS 2017.

The graph shows the location of the countries according to the Gini coefficient of gross income and net wealth. Due to generally higher Gini of wealth than of income the range of the x-axis differs from the one of the y-axis.

Countries with low Gini of income and low Gini of wealth can be found in the lower left corner, those with high Gini of income and high Gini of wealth in the upper right corner of the graph.

There is no strong correlation between the Gini of income and the Gini of wealth.

On the one hand, there are several countries with high wealth inequality but low income inequality (e.g. Austria) or countries with low wealth inequality but high income inequality (e.g. Lithuania).

On the other hand, there are also countries with low wealth inequality and low income inequality (e.g. Slovakia), or countries with high wealth inequality and high income inequality (e.g. Estonia).

How much private wealth has been accumulated?

Source: Eurosystem HFCS 2017.

The bar chart shows the mean wealth-to-mean annual income ratios ranked across countries.

These ratios are analogous to the capital-to-income ratios, which are usually defined as the capital stock divided by national income of an economy, and which are prominently used by Piketty (2017) and others as a major measure of capital accumulation and the importance of inherited wealth versus wealth created in a lifetime.

The wealth-to-income ratios shown in this chart are to be interpreted as a form of disaggregated capital-to-income ratios based on means and allow to analyse wealth and income jointly.

The country with the highest ratio is Cyprus, where in order to reach the level of national mean household net wealth, households would have to save income at the level of the national mean household income during 15.2 years. Further countries with high wealth-to-income ratios are Malta (12.8) and Luxembourg (9.6).

With a wealth-to-income ratio of about 3 Latvia is the country with the lowest ratio, followed by the Netherlands (3.4) and Finland (4.0). In Austria, households would have to save about 5 times the annual national mean household income in order to reach the level of national mean household net wealth.

How does net wealth compare across countries along the full distribution of wealth?

Source: Eurosystem HFCS 2017.

The graph shows the full distributions of net wealth in selected countries compared to the overall distribution of all HFCS countries together.

Cross country comparisons usually use mean or median measures. However, both measures focus on differences at certain points of the distributions rather than on the variation between countries’ overall distributions.

As there is no such thing as a typical household one could compare across countries, a better alternative is to look at the full distributions to observe cross-country differences as well as the full range of heterogeneity within countries.

The chart plots the percentiles of the net wealth distributions of 7 selected countries. The unit of measurement used are the overall net wealth percentiles of all HFCS countries together; they form the 45 degree line.

Luxembourg’s net wealth distribution always lies above the overall distribution, implying that all Luxembourg households always have a higher net wealth than their international counterparts.

The chart also allows an interpretation in absolute terms. For example, at least the bottom 10% of households (in Luxembourg) or at most the bottom 30% (in Latvia) has less than EUR 8,000 in net wealth (20th overall percentile).

Is one country rich and another poor?

Source: Eurosystem HFCS 2017.

The graph shows the composition of overall net wealth deciles by countries.

To visualize also the shares of smaller countries, the individual countries have been reweighted to equal size. This means that each country would have a 1/21th share in every decile (as there are 21 countries in the sample) if net wealth was distributed equally across countries.

We find the overall distribution to contain a disproportionally large number of households from Luxembourg and Cyprus at the top, a disproportionally large number of households from Slovakia and Lithuania in the middle and a disproportionally large number of households from Latvia at the bottom.

Nevertheless, the wealthy households are spread over all countries in a rather stable pattern. In all countries we can find households with very low and household with very high levels of wealth. The variation of wealth between countries seems to be much smaller than the variation of wealth within countries analyzed earlier.

Is there an age pattern of net wealth?

Source: Eurosystem HFCS 2017.

While the left graph shows the distribution of net wealth over age of the household’s reference person in Austria, the graph on the right hand side presents the same relationship for Germany. The household’s reference person is determined by using the UN/Canberra definition in UNECE (2011).

The box plots display the interquartile range (P75-P25) and the median of the distribution (in EUR thd) and illustrate the extent of wealth heterogeneity across households.

From the left graph, one can see that in Austria, the median household accumulates net wealth from about 16,000 euros in the youngest cohort to about 166,000 euros in the pre-retirement cohort (55-64 years) and then decumulates wealth to a level of 77,000 euros in the oldest cohort (older than 75 years).

The right-hand graph shows that in Germany, between 65 and 74 years the level of decumulation is lower than in Austria if compared to the pre-retirement stage (55-64 years), as the median and the quartiles are very similar in both age intervals. In Germany, the most important level of decumulation is found after age 75.

Note, as this is a cross section of the population, the age pattern has to be interpreted with caution as it likely shows a mixture of age and cohort effects.

What is the composition of wealth?

Source: Eurosystem HFCS 2017.

While the left graph shows the composition of gross wealth across net wealth deciles in Austria, the graph on the right hand side presents the same for Germany.

From the left graph, one can see that in Austria, the net wealth of households at the lower part of the wealth distribution primarily consists of bank deposits and vehicles and valuables. Furthermore, for households in the middle part of the wealth distribution real estate assets have the largest share in their net wealth. Finally, for households in the upper part of the wealth distribution business assets make up an increasing part of their net wealth.

The right-hand graph gives a very similar picture for Germany. However, financial assets (excluding deposits) make up a larger share in households’ net wealth than in Austria across the whole wealth distribution, which probably reflects the high popularity of the Riester pension accounts in Germany. Compared to Austria, the larger share comes at the costs of deposits for lower fortunes and at the cost of business assets for higher fortunes.

The increase of real estate assets at the very bottom of the net wealth distribution refers to main residences of highly leveraged homeowners.

How many households hold debt, and how much debt?

Source: Eurosystem HFCS 2017.

The table shows the distribution of debt across all households for every country.

Households are arranged according to their absolute debt (in EUR thd) from low (P1) to high (P99). Households without debt are included with the value “0”.

The table displays that in Austria between 60% and 70% of all households have no debt. The median household holds a positive amount of debt in only 5 out of the 21 HFCS countries: the Netherlands, Finland, Cyprus, Luxembourg and Ireland.

In Austria, only 5% of all households have a debt above 114,000 euros. This right tail of the distribution shows a lot of dispersion across countries. While in Croatia, the top 5% of all households are indebted with 23,000 euros or more, in Luxembourg they are indebted with 521,000 euros or more.

How is housing related to debt across countries?

Source: Eurosystem HFCS 2017.

The table shows several statistics related to housing and indebtedness of households across countries.

The homeownership rate is very heterogeneous across countries. While in Austria and Germany, less than 50% of the households own their main residence, in Lithuania there are more than 90% homeowners.

Although Lithuania has so many homeowners, only about 12% of households hold mortgage debt, even less than in Germany or in Austria. The proportion of households holding mortgages also varies a lot across countries and ranges from 9% in Italy to 48% in the Netherlands.

The table also displays some debt burden indicators which are commonly used in the literature to identify credit default risk.

According to the debt service-to-income ratio indicator, Cyprus is the country with the highest median debt burden: there the median household with debt repayments has to repay 26% of its gross income. Furthermore, the top 10% households with the highest ratio have to repay more than 98% of their gross income.

Bonus material: Interactive wealth-income 3D figure

Source: Eurosystem HFCS 2017.

The graph displays the joint distribution of income and wealth in three dimensions for both Austria and Germany.

The third dimension shows the (kernel) density estimate for every income-wealth combination.

The higher the peaks in the graph, the more households are found to exhibit the corresponding wealth-income combinations.